Section 44ADA – Presumptive Tax Scheme for Professionals

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Who can opt for presumptive taxation scheme under Section 44ADA?

To claim benefits of non-maintenance of Books of Account, you need to fulfill the following two conditions:

1.The person needs to be a professional, who belongs to any of the following professions:

2. legal,

3. medical,

4. engineering or

5. architectural profession or

6. the profession of accountancy or

7. technical consultancy or

8. interior decoration or

9. any other profession as is notified by the board (Board here means the Central Board of Direct Taxes), &

10. Should have Total turnover or Gross Receipts below or equal to Rs 50 lakhs in the previous year.

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What is the presumptive tax rate under this Section 44ADA?

In the presumptive taxation scheme under Section 44ADA the tax would be charged on 50% or more (as claimed to have been earned by the assessee) of the total turnover or gross receipts.

It implies that the 50% or more (as claimed to have been earned by the assessee) of the total gross receipts would be treated as profits & gains from profession.

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Are there any deductions available under this scheme in relation to expenses incurred for the profession?

The answer to this is no.

All the deductions under section 30 to 38 shall be deemed to have been allowed in full & no further deduction shall be allowed.

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Are there any deductions available to the person opting this scheme in relation to Chapter VI-A i.e. Section 80C, 80D, etc.?

Yes, those deductions will be available as available to other persons.

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Treatment of WDV of assets

The WDV of any asset of such shall be deemed to have been calculated as if the assessee has claimed and had been actually allowed deduction in respect of depreciation for it.

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Do we have to prepare books of accounts & audit?

Under this scheme a relief is provided to professionals referred in Section 44AA (1) from maintaining the books of accounts & audit. Such assessee opting for the presumptive scheme are not required to maintain books of accounts under section 44AA or get them audited under section 44AB.

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What if the person wants to claim lower profits than 50% of the total gross receipts?

In case of a person, wants to claim profits lower than the profits assumed under section 44ADA i.e. 50% of total gross receipts and his total income exceeds the maximum amount which is not chargeable to income tax i.e. 2, 50,000, he has to maintain books of accounts under section 44AA & get them audited under section 44AB.

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FAQ’s

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1. Raj is an insurance agent, his total turnover for the F.Y. 2019-20 is Rs 48 lakh. Is he eligible to opt for presumptive taxation scheme under section 44ADA?

  • A person earning an income in the form of commission or brokerage cannot opt for the presumptive taxation scheme under section 44ADA. So Mr. Raj is not eligible.

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2. I’m an architect by profession. I have total gross receipts of Rs 45 lakh in the F.Y. 2019-20. I want to claim a profit of Rs. 20 lakh in the F.Y. 2019-20 which are less than 50% gross receipts. Do I have to maintain books of accounts?

  • Yes, you have to maintain books of accounts & get them audited. If you want to claim lower profits and have income which exceeds the maximum amount chargeable under income tax, then you have to maintain books of accounts & get them audited.

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3. I’m a doctor by profession. I opted for presumptive taxation scheme under section 44ADA. After declaring profit @50% of gross receipts, can I claim further deduction of expenses incurred for my profession?

  • No, you cannot claim any further deductions under section 44ADA. All the deduction under section 30 to 38 shall be deemed to have been allowed.

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4. I have opted for presumptive taxation scheme under section 44ADA. Do I have to pay advance tax?

  • Yes, you have to pay advance tax on or before 15th March of the financial year. If you fails to pay advance tax, interest will be charged on such amount as per under section 234B & section 234C.

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5. Amita is a dentist. She has total gross receipts of Rs. 49 lakh. She opted for presumptive taxation scheme under section 44ADA. She wants to know if she can claim depreciation for the medical equipment under section 44ADA.

  • No, in case of a person opting for presumptive taxation scheme, under section 44ADA, cannot claim deduction for depreciation. As under this section it is assumed that the deduction for depreciation has already been allowed and WDV of such asset shall be deemed to have been calculated.

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6.Shreya is an interior decorator. She has a total turnover of Rs. 40 lakh. Is she eligible to opt for presumptive taxation scheme under section 44ADA?

  • Since, Ms. Shreya is carrying a profession referred to in section 44AA (1) and has a total turnover less than Rs. 50 lakhs, she satisfies both the conditions of section 44ADA. So, she is eligible to opt for presumptive taxation scheme under section 44ADA.

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